Living paycheck to paycheck is a trap that can seem virtually impossible to get out of. The good thing is that the situation may not be as bleak as it first seems. Make no mistake, you will need to get to work on improving your situation but with a little diligence it can be done and can possibly improve in as little as a few short months.
Assess your situation
Before you can begin any improvement in your financial situation it is best to take a step back and look at your finances from a higher view point. Admittedly, some of this stuff is like nails on a chalk board but you will need to buckle down and work your way through it in order to come out on the other side with a new financial outlook and new habits as well.
First step when looking at your situation is to determine exactly where your money is going which really means that you need to track your spending. Spend a month looking at your bank statement and put every single penny spent into a category. It might be easier to look at it on a daily basis so that you can stay on top of it.
Create a plan of attack
Now that you understand where your money is going it is time to focus your energy on creating a strategy for reigning in your spending. More importantly, the strategy needs to be one that you can stick to.
The word budget has become a dirty word that most people refuse to use. What is the big deal? If you look at it like any typical business would then you’ll realize that every single company that cares about their bottom line incorporates a budget into their daily activities. Tracking revenue, in your case income, and also tracking spending.
If you have trouble with this concept by possibly viewing it as some sort of cap or enormous albatross that is weighing you down then try to challenge that thought process. Think of it as a means to free your mind from any stress that comes from spending. It may come as a surprise that you are spending money on something that no longer lines up with your priorities – easy win!
Fine tune your strategy
By now you may be a couple of months in to your new financial plan – allocating your spending with an intentional purpose. At this point, you realize what is working and what is not. You may decide that it is just too much work to keep up with. If so, you may want to consider automating your finances.
In his book I Will Teach You To Be Rich, Ramit Sethi walks you through how to set up your finances where all your of money is routed to accounts that are designated for certain purposes. With online banking, this a much easier to accomplish. For instance, right off the top route a certain percentage to your savings accounts. Next, now that you know what your typical expenses are thanks to your tracking exercise, take that percentage of money and route it to an account specifically for bills like mortgage or rent, utilities, debt repayment, etc. The rest of the money should go to yet another account where you use this money for guilt free spending.
Moving from understanding where your money is going to spending money on purpose is a huge step in moving away from the grind of living paycheck to paycheck. Trim expenses where need be. However, don’t get totally focused on just this aspect. Find ways to earn more money by being more valuable at work or even starting a side business.
The point is that with your mind now free of worrying about money who knows what you can achieve!